The assignment is based on Illustration $15-6$ on p$.630.$ Your are required to determine which $($if any$)$ of the potential componenty units $-"$B$","$C$"$ or $"$D$"-$ must be included as part of the City of Lubburg's $("$A$")$ financial reporting entity.$$ Your solution must include a clear indication for each of the potential component units shown $($B $$ Lubburg Independent School District; C $$ Lubburg Building Authority; D $$ Lubburg Transit Authority$)$ as to whether:

it should be included in A$\text{'}$s financial reporting entity and why it should be included, or

it should not be included in A$\text{'}$s financial reporting entity, and why it should not be included

Your answers should be based on the criteria discussed on pp$.630-633.$

ve imdsmbe rewilferi $.$ has tw$.$ as poweraid compongeri amifs$)$ in addition to is own legal entity. The goveramenth legal concity is called the primary govermment.

Lubburg Bulding Authoriny

$1$ Gofvirming aumority in appointact by the mayor:

$2.$ Althonty was ontacimbed to finance conitruction of civic ceerter whilichly lebsed to the cry

$\backslash ($ B $\backslash )$

Lobturg indoperoien

Schbor Dismicer

$1.$ Governing authprity is oleces by citluang of Lubburg.

$2$ Bounifaries of city and schicol district ane coterminous$.$

$3.$ The cily ofton guarantues school district dobr issues.

$4.$ The school district engabtimes its own budget andiax lewy

D

Lublumg Thanact Authomity

$1.$ Goyerning authority is appointed by the mayor, on aity council approre, for staggered Fiywur terms.

$2.$ The transit authority serves primurly tho Lubturg area

$3.$ The ory doesn't approve the transt authonty budget and fimt responalite for its defidets or its debts bit sometmen provides operating rubsimies.

Tho losut Should the City of tubburg financiej reporting entity be onty A$?\backslash ($ A $\backslash )$ and B$?$ A and C$?$ A and D$7$ Same cher combiration of A$.$ B$,$ Ci and D$?$

of necilitatint itie dellyery af gover trment sevice. ment' s financial stat$$ments miy$/$rading$.$

Financial accowntability is the brasdest, most coumes basis for an orgamize non to be a component unit. Financial accountability is explaned in thustration $15-7.$ As the illustration indicates, a primary governmeth carnat be finazcinally $$cceuntable for an organization unless it either $(1)$ appoints in voting majority of the organization's governing body or $(2)$ has a financmi benefit or burden retationship with the organization. The primary government $($PG$)$ is financially acconatable for other organizations if the PG has:

$-$ Both appointment authority and a financial benefit or burden relstisusisp with wather entity, or

$-$ Appoinment authoriry over another entity upon which it has the abllity to impoxe its will $($see Illustration $15\mathrm{.}7)$ or

$-$ A financial benefit and burden relationship with another entity that is fiscully dependent on the PG $($as described in the illustration$).$

If a PG is not financially accountable for another entity, il still may be required. or choose, to treat other entities as component units for other reasons.

Holding a majority equity interest in another entity is another important reporting entity definition criterion. Although it is unusual foragoverment to hold $\backslash$& majority equity interest in a business for the purpose of facilitating delivery of government services, it is very common for governments to enter into joint ventures with other governments. Airports, correctional centers, bus and rail transportation, antimal shelters, and economic development activities are only a few of the rypes of joint ventures conducted by governments around the country. The participating governments hold equity interests in many of these joint ventures. For other joint ventures, there are no equity interests. Even if a primary government is not financally accountable for an organization, it must include it as a component unit it it holds a majority equity interest in it for the purpose of delivering government services.

Fund$-$raising organizations are addressed primarily in GASB Statement No$.39,$ "The Financial Reporting Entity$-$Affliated Organizations." This statement requires component unit treatment for any affiliated, legally separate, tax$-$exemps entity if all of the following are true.

THE FEVANCIAL ACCOUNTABILTY CRTTERLA any amponent unit's board or official, arany other uppointec of the PG$.$

$2)$ DNAVCIAL BENEFTI OR BE$/$RDEN REIATIONSHIPS: ane of the following is truc:

$-$ The PG has the ability lo access the resources of the entity without dissotation of the ontity, ar

$-$ The PG is legally or otherwise obligated to finance the deficits of or provide flumeiad support $($ather thin in oxchange or cxebange$-$like lrankactions$)$ to$,$ the organization, or

$-$ The PCI is abligated in some mannen for the debt of the organizstion

$(3)$ ABILITY TO IMPOSE WILL RELATIONSHIPS:

A primary government has the ubility to impose is will $($i$.$e$,$ significantly influence the tspo and levels of services$)$ on a potential component unit if the primary government has the tubstantive authority to do any one of the following:

$-$ Remove appointed governing board members at will, or

$-$ Approve or require

Reporting Eutly Disclos